Buying a Used Car From a Private Seller: Legalities

If you've decided buying a used car is best for your budget, you also need to decide whether to buy that car from a private seller or a dealer. There are advantages and disadvantages to both.

Legal Protections

When a consumer buys a used car from a dealer, he or she purchases a product from a business. That business must comply with state and federal consumer protection laws. When a consumer purchases a used car from a private seller, however, the purchase is made as is -- without warranty, expressed or implied, unless otherwise noted in a contract signed by the seller and the buyer.

In other words, if you buy a car from a private seller, there is little legal recourse in the following situations: if the vehicle was wrecked and repaired; if it is determined that the car was stolen and retitled; if the odometer was rolled back to reflect lower total mileage; or if the vehicle was declared salvage in another state due to a collision, flood or theft.

When buying a car from a private seller, it is important to protect yourself against potential scams by obtaining a Vehicle Identification Number (VIN) history report and having the used vehicle thoroughly inspected by an ASE-certified mechanic of your choosing. You also can purchase a vehicle history report from a company such as CARFAX. In some cases, private sellers will purchase the inspection and history report for you. Also, most sites that offer vehicle listing or shopping services have fraud prevention tools and tips that can help you avoid mistakes.

Dealing With Strangers

Whether you choose to buy a used car from a private seller or a dealer, you're likely to be meeting with people you don't know. With a dealer, such meetings take place at a business establishment during normal business hours. With a private seller, such meetings may take place after hours at a personal residence.

When purchasing a used car from a private seller, it is advisable to meet in neutral, public locations to inspect and test drive the vehicle, and, if the vehicle meets your requirements, handle the purchase and transaction. Avoid meetings at a private residence. If that isn't possible, arrange to meet only during daylight hours. Also, be sure not to send payment electronically for a vehicle sight unseen.

Paperwork

Another disadvantage of buying directly from a private seller is that all the paperwork regarding transfer of ownership is your responsibility. Both the buyer and the seller have to ensure all the dots are connected, from financing and sales tax to proper car registration. By contrast, when buying a used car from a dealership, the dealer handles all the paperwork. If you're concerned about this, your local department of motor vehicles can supply you with all the forms and information you'll need ahead of time.

Summing Up

Everybody likes to save money, and you can save money by buying a car from a private party. The savings come at a cost, however -- primarily in terms of legal protection and handling of the paperwork. On the other hand, there are ways to ensure you are not getting a lemon, and there's no way to quantify the peace of mind that comes with knowing the previous owner. If those precautionary steps are really important to you and saving money is your main objective, buying a car from a private seller is the way to go.

Christian Wardlaw
is passionate about the cars, trucks, and SUVs people actually buy, not the models about which they fantasize. An industry veteran and former editor-in-chief of Edmunds.com, this father of 4 loves to inform and entertain everyday car buyers.